Farmers not winners in breeding company split

Posted by Damien O`Connor on June 02, 2016

News that farmer cooperative Livestock Improvement Corporation (LIC) is seeking to split the business and unlock value in the company should raise a red flag for dairy farmers, Labour’s Primary Industries spokesperson Damien O’Connor says.

“This company was set up to breed the best dairy cows in the country and the cooperative structure was designed to reinvest any profits by way of lower costs and better science for dairy. The changes to the company structure when Fonterra was formed allowed dry shares to be owned by farmers with limited trading and tenure.

“That flexibility was never intended to allow demutualisation of a company that has served the interests of Kiwi farmers well and needs to into the future.

“While the proposal might leave farmers owners with the core livestock breeding, the value generations of farmers have built up in the company will be transferred into the hands of outside investors for high risk offshore ventures and limit the future of the cooperative company.

“At a time when Kiwi dairy farmers need to reassert their position as low cost producers of quality pasture feed milk the offshore company proposed will be providing key advantages and intellectual property to our competitors.

“Investors and executives will be the only other winners.

“The real danger now is dairy farmers under financial pressure will vote to liquidate their interest in their cooperative to help cover their short term debt. When survival is uppermost in the minds of the 85% who will be losing money again this year this is hardly the time to be pushed into making long-term decisions.

“It almost seems planned that decisions on governance of Fonterra, survival of dairy farming businesses and the demutualisation of LIC are put before dairy farmers at a time of industry crisis.

“I am suspicious and farmers should be too when considering their options,” Damien O’Connor said.